Nevada Real Estate >> Las Vegas Real Estate Specialist: Donne Knudsen CalState Realty Services (Los Angeles & Ventura Counties in CA)

This is probably one of the biggest misconceptions that a lot of consumers have about getting approved for a loan and ultimately the biggest reason why so many potential buyers remain on the fence about jumping off and doing what they need to do in order to buy a home.

I talk to people every week who want very much to quit renting and buy their own home but they are so afraid of taking that first step – contacting a lender to see what they qualify for!  They have heard from so many – their friends and family and even the media about how only those with perfect credit can qualify for a loan.  They know that their credit isn’t perfect because of some issues they have had in the past with some of their creditors.

The odd thing about so many of these folks is that they have never actually seen and/or pulled their own credit report so they really have no idea what their credit scores are or what is actually being reported on them.  Professionally, I have found that many of these folks actually fear the worst when the reality isn’t the worst and in some cases, nowhere near as bad as they suspected.

Simply pulling a credit report for many of these folks and explaining to them that they indeed have some loan options available to them has more times than not relieved the person of so much anxiety and fear associated with that whole process.  One such prospect even recently told me that when I told them they were a good candidate for a particular kind of loan program, they said it was like when they got hired for their job that they really wanted and had interviewed for three times before they got it.

I love it when clients tell me things like that, it’s such a constant reminder of why I continue to do what I do and why I love working with my little low-medium income buyers who are mostly first time buyers.  These folks generally know little to nothing about buying a home and getting pre-approved and so many are actually afraid to start the process for fear of not being able to qualify for a loan and having past mistakes being rubbed in their face.

Even in spite of all the info available to them on the internet and in spite of all the research these folks do, so many of them are scared out of their mind of taking that first step of talking to a lender and finding out what their options are. 

For me, getting these folks through that first step is all about educating them on the realities of getting pre-approved as well as the loan process.  This is when I have the opportunity to dispel a lot of crap they hear from other people like their friends and family and especially the media.

In regards to my most recent client, while they did have some derogatory issues with school loans a few years ago, they did eventually resolve them and have been in good standing for a couple of years now.  While their scores were not the best scores I’ve ever seen, they most certainly weren’t the worst scores either; quite frankly, they’re actually pretty average.     

I did ask them to provide me with a letter of explanation (LOE) about why they became delinquent with their school loans for a period of time.  They will also have to pay off a recent collection account from a previous creditor that they have been refusing to pay because of “principle”.  I simply informed them of how an underwriter would be reviewing their “principles” and explained to them that in some cases we (mature, responsible adults who want to buy a home) have to swallow our pride in order to achieve a greater goal.  In this case, suck it up, pay the bleeping bill so you can buy a house.

Buying a home is one of the most important decisions someone can make. Today's lending environment can be really scary, which is why it's important to get as much information as possible before starting the process. The pre-approval process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs.

For more info on how you can qualify for a mortgage loan, contact me, Donne Knudsen of C2 Financial Corp, at 805.2069123 or donne4loans@earthlink.net.

What Kind of First Time Buyer Programs are Available in Los Angeles & Ventura Counties? FAQ - #1

What kind of property can I buy? FAQ - #2

What Kind of Paperwork Do You Need to Pre-Approve Me? FAQ - #3

Why Do I Have to Get Pre-Approved with Other Lenders I Don't Want to Use Before I Can Make an Offer on a Property? FAQ - #4

What Kinds of Things Can Go Wrong in the Loan Process? FAQ - #5

What are Impound Accounts & Why Do I Need to Have Them in Order to Close My Loan? FAQ - #6

Can You Help Me Get My Kid Get Out of My House? FAQ - #7

I'm Supposed to be Closing Next Week Can You Help Me? FAQ - #8

If I Buy a Duplex, Can I Apply the Tenants Rent Towards My Mortgage? FAQ #9

What Happens if My Appraisal Comes in Low? - FAQ #10

What is a HomePath Property and How Can I Buy One? - FAQ #11

Are There Still Loan Programs Where I Don't Have to Put Anything Down? - FAQ #13

Photos courtesy of flickr:   icy66   mikezenero   milkham   lindes   jpersons   giacomomacis

First and foremost, I feel compelled to state that this post is strictly my personal opinions based on my own professional experiences with my own borrowers here in Los Angeles & Ventura counties.  As an NMLS licensed Mortgage Loan Originator (MLO) as well as a CA DRE licensed agent, it's important that anyone from outside of CA reading this understands that in their area or state, the rules, regulations and codes may differ from the ones here in Los Angeles & Ventura counties.

I’ve recently come across a few posts that got me to thinking of my own borrowers here in Los Angeles & Ventura counties and about a couple of the trials and tribulations they have in trying to purchase a home here.  While there are numerous issues for buyers when searching for a home to buy here, one of the most challenging issues are property conditions and how the condition of a property can actually disqualify a property for financing. 

In Permits? We Don't Need No Stinkin' Permits! by Jay Markanich, Jay (a VA state home inspector) outlines the issues with a recent property that he inspected that had some serious construction issues with an unpermitted addition.  Jay discusses not only the building code standards that this homeowner violated in the way that the addition was constructed but he points out the safety hazards as well as the insurance coverage issues that this unpermitted work created. 

For anyone considering the purchase of a home, I simply can’t stress enough, the importance of conducting some absolutely vital due diligence before you proceed with that property that you have just contracted to purchase, starting with a home inspection. 

Having that home inspected by a certified and licensed home inspector is just the first step in conducting the necessary due diligence before buying a home.  For only a few hundred dollars, a good home inspector can ultimately save you thousands of dollars by discovering and assessing any issues with the home that may or may not be a problem now or later. 

I have countless stories of how so many of my borrowers have avoided buying absolute money pits by having the property they wanted to purchase inspected during the inspection period.  Furthermore, a good inspection can also identify any minor issues that a prospective home buyer may want to take care of after the close of escrow. 

Having said this though, I am not proposing that buyers use inspection reports as a means to renegotiate their purchase contract or to create long repair requests demanding the seller repair every minute thing on the report.  That is just silly and not that smart in this market where competition is fierce for halfway decent properties in relatively good condition. 

While I can’t speak for other markets, here in Los Angeles & Ventura counties, halfway decent properties, with no major issues (key word here being major), are in high demand.  If you push a seller to repair minor issues that have no major health and safety issues and/or no building code violations, then you could very well find yourself cancelled out of the game so that the seller can just take one of those other offers that they got during the multiple offer negotiations. 

However, any major issues that were discovered during the inspection period need to be brought to the sellers and their listing agents attention, especially if those property conditions were not previously disclosed on the CA seller’s transfer disclosure statement (TDS) or the CA agents visual inspection disclosure statement (AVID).  Here in CA, these are required disclosures for all property sales and they must be as accurate as possible.

Furthermore, here in CA, inspection reports belong to the property and not the parties so providing a copy of the inspection report both the seller and their listing agent will allow them to honestly and accurately disclose any property conditions that they had not previously disclosed or knew about.

Getting an independent home inspection is only the first step in buyers conducting their own due diligence during the inspection period.  On that note, I hope you stay tuned for my next installment, where I will discuss other due diligence matters that buyers need to be doing on the property they are contracted to purchase, especially here in Los Angeles & Ventura counties.  For some properties, this can actually be a deal breaker in closing escrow. 

Buying a home is one of the most important decisions someone can make.  Today’s real estate market can be really scary, which is why it’s important to get as much information as possible before you start your search.

The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need to be working with professionals that will work in your best interests.  If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen at C2 Financial Corp., at donne4loans@earthlink.net or 805.2069123 and I will be happy to assist you in any way I can.

ATTENTION PROSPECTIVE HOME BUYERS: Do Your Due Diligence BEFORE You Close Escrow!!! - Part 2

Photos courtesy of flickr:   vahm54   jledme   mustipher   giacomomacis

On September 1, 2011, new changes to appraisal reports were implemented called the Uniform Appraisal Dataset (UAD).  UAD was established to enhance appraisal data quality and consistency related to home values. 

These changes are now being applied to all appraisals delivered to both Fannie Mae and Freddie Mac.  It’s been rumored that FHA will adopt UAD on case numbers assigned on or after January 1, 2012.

Being that I am waiting for my first appraisal since the changes went into effect, I thought it best to look into these changes to find out how they are going to affect my borrower's appraisal, especially since I have some grave concerns about the condition of this particular property my borrower is in contract to purchase. 

In speaking with some of my fave lenders last week about the new changes and asking them about any problems they’ve seen so far, I’m hearing reports that “so far, so good” and that “it’s too soon to tell”.

For the most part, UAD will not be changing the way that appraisal forms look but there will be some new fields that appraiser will need to complete and lenders will be looking for additional info than they’re currently getting.  Supposedly, the UAD will allow for consistent appraisal reviews by using standard definitions and responses.  That will remain to be seen.

The biggest change in the data that appraisers will be required to provide is more extensive descriptions on property condition and construction quality.  This actually could be a good or bad thing depending on how it’s rated and reviewed.

Currently, I am seeing little to no value adjustments for property conditions and/or upgrades.  I have seen well maintained, upgraded, move-in ready properties compared to run-down, dilapidated, dumpy model matches with little to no adjustments in value for property conditions and/or feature upgrades.  Quite frankly, this is wreaking havoc on my market here in Los Angeles & Ventura counties.  The new ratings for property conditions that will be required are listed as follows:

C-1  The entire structure is new, has never been occupied and has no physical depreciation.

C-2  Existing home with no deferred maintenance and requires no repairs. This rating is given if the property is “almost” new or has been totally renovated. 

C-3  Existing home, well maintained but displays evidence of normal wear and tear. 

C-4  Existing home, minor deferred maintenance and requires only minimal repairs. 

C-5  Existing home, with major deferred maintenance and is in need of significant repairs but the home is still livable as a residence. 

C-6  Existing home, with severe defects that affect safety, soundness and livability. If property receives this rating, it’s not eligible for a conventional loan.

It will be interesting to see how different appraisers will interpret these definitions, especially those between “normal wear & tear” and “deferred maintenance”.  Furthermore, I’m certain there will be some differences in what some may define as “livable” and “not livable”.

The appraiser will also be required to indicate if there has been any material and/or structural work done to the kitchen or bathrooms in the prior 15 years.  Appraisers will also be required to use one of three ratings a) not updated, b) updated and c) remodeled and they will need to provide additional info on the updates and remodeled features. 

There will also be changes in how appraisers will be required to rate the quality of construction on newly built homes as well as recently renovated and remodeled properties.  The new ratings for the quality of construction are as follows:

Q1  Unique home individually designed by an architect for a specific user and details are exceptionally high quality.

Q2  Custom designed home built on individual property owner’s land or high-quality tract lots. Workmanship and materials are high quality. 

Q3  Higher Quality homes built from readily available blue prints in above-standard tract lots or individual’s land. Materials in home are up-graded from standard materials and workmanship exceeds standards. 

Q4  Meets or exceed building codes: Standard or modified blue prints. Materials, workmanship, finish work are stock builder grade and may have some upgrades. 

Q5  Basic, standard quality, economy homes with limited interior design. Meets minimum building codes and inexpensive construction, stock materials and limited upgrades. 

Q6  Low cost construction used and may not be suitable to year-round use. Low quality and could be built by non-qualified builder with or without plans.

As can be expected with any new changes that affect the loan process, I'm sure there will be some initial hiccups until things seem to work themselves out.  I'm hoping that these new changes will bring in better appraisals with more accurate value assessments based on property conditions.

I guess time will tell if these changes will have not only a positive effect on my market as well as my own borrower’s appraisals and transactions.

Photos courtesy of flickr:   fanniemae   freddiemac   koyume     

I recently came across a New York Times article about "Job Jugglers", young people who find they are working long work weeks with more than one job. 

After completing their educations (with a boatload of school loans), these young folks not only strive to stabilize their financial means by doing whatever they have to but they rather enjoy it and really don't want to limit themselves to just one job. 

The article goes on to state that this trend is probably not going to change anytime soon. 

"The likelihood of this generation devoting their professional life to just one job or career at the same time is simply counterintuitive to their worldview.  We will see this generation pursuing multiple jobs and careers at once even in a robust economy."

As a Mortgage Loan Originator (MLO) here in Los Angeles & Ventura counties who works with a lot of young first time home buyers, multiple jobs is not unusual among many of these buyers yet it continues to plague some of their loan transactions when dealing with some lenders and their underwriters. 

For many people who still have a job, 60+hrs a week has pretty much become the new 40hr a week job and for many, that entails more than one job.  With so many companies and employers trying to reduce expenses while still trying to maintain production levels, many employees have to accept reduced work weeks or part time positions in order just to keep their jobs.

Many of these employees (especially those with huge school loan payments hanging over their heads) have to find second part time jobs to supplement their first part time job in order to maintain their financial security.  This trend of working longer hours and more than one job is not going to go away anytime soon; for many it is simply their new reality (and has been for quite awhile) and some lenders and their underwriters have been slow to adapt to this new trend. 

Just recently, I spoke with someone who was getting a lot of grief from their big, national, retail bank about their 60+hr work week at more than one job.  In the last few years, this has become a common problem for many "job jugglers" who need to be able to use all of their income for qualifying purposes. 

Mind you, these borrowers have met the requisite two years of continuous employment and has maintained these 60+hr work weeks for more than the requisite two years too. 

I too have come across this issue myself with some of my own borrowers but as a mortgage broker with dozens and dozens of lending sources, I am fortunate that I have so many lending sources to choose from; one of the best benefits of working with a mortgage broker. 

While a lot of the big, national, retail banks will penalize "job juggling" borrowers for doing what they have to do to maintain financial stability in this unstable economy, there are other lenders (smaller, local lenders) that will work with "job jugglers" in qualifying them for a mortgage loan. 

While it may seem that lenders these days are oblivious to the fact that some people are ambitious and strong-willed when it comes to doing what it takes to support themselves and further their professional careers, rest assured folks, there are other lenders that are not oblivious to this trend.

Today's real estate market can be really scary, which is why it's important to get as much information as possible before you start your search.  The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs.

If you're a "job juggler" here in Los Angeles & Ventura counties and you're big, national, retail bank lender is giving you grief about your 60+hrs work weeks and/or your multiple jobs, contact me, Donne Knudsen at 805.2069123 or donne4loans@earthlink.net.  I may be able to help and I would love to be able to assist you in choosing the most affordale home loan option for your needs.

Photos courtesy of flickr:  paulawirth   jpersons   giacomomacias  

After reading a post here on AR about how a buyer commented to an AR Realtor at the closing table that they didn't know there were closing costs, I was inspired to blog about how incredibly unlikely this probably was.  In Part 1, I discussed the three following documents: the loan application (1003), the itemized fees worksheet (IFW) and the HUD settlement cost booklet.  All of these documents are three of the earliest and most basic documents that disclose and explain a buyers closing costs.

In Part 2, I want to discuss three more documents that disclosed to the borrower their closing costs and that also require the borrowers signature stating that they acknowledge receiving these documents and have been apprised of what their closing costs and fees are that are associated with their mortgage loan.

Good Faith Estimate (GFE):  Once a propety has been identified, by law, the MLO/lender is required to provide the borrower with a GFE for the property.  The GFE is a three page document that not only summarizes the terms and conditions of the loan you've applied for but it also breaks down your settlement costs and fees.

Furthermore, it also explains to you which fees and costs are subject to change, which is anywhere from zero tolerance to no more than 10% tolerance.  For the record, the lender origination fees have a zero tolerance and only title and escrow fees are eligible for the 10% tolerance.  The GFE also provides a comparison table for borrowers to be able to compare different loan products that they are shopping for.

Mortgage Loan Disclosure Statement (MDLS):   Like the federally regulated GFE, the MLDS is provided to the borrower once a property has been identified and in conjunction with the federally regulated GFE.

Like the GFE, the MLDS is a three page document that not only summarizes the terms and conditions of the loan you've applied for but it also breaks down your settlement costs and fees.  The borrowers signature block is on page three.

Here in CA, the MLDS is regulated by the CA DRE and the CA DRE requires that a borrowers settlement costs be separated by which ones are paid to the broker and which ones are paid to the other settlement service providers.

Settlement Statement (HUD!):  The HUD1 is similar to the GFE in that it summarizes the terms and conditions of the buyers loan as well as itemizes all of the costs and fees associated with the escrow transaction.  The borrowers signature block is on the last page.

However, unlike the MLDS that separates the brokers costs and fees from the other settlement servicers costs and fees, the HUD1 statement identifies which costs and fees are the buyers and which ones are the sellers.  Additionally, the HUD1 also compares the GFE costs and fees to the HUD1 costs and fees to illustrate that they are within their federally regulated GFE tolerance levels.

Typically, the buyers MLO/lender will receive two HUD1 statements, one when escrow is opened (estimated HUD1) and one more before loan documents are ordered (final HUD1).  The borrower is required to sign both statements to acknowledge that they have received copies of them.

This is why it is legally impossible for a buyer to get all the way to the closing table without knowing what their costs are.  Regardless of whether or not an MLO and/or lender explained every single detail of these disclosures and documents, the fact that the buyer was provided these disclosure and documents and is required to sign and acknowledge most of them leaves the buyer responsible for knowing what they're signing and asking questions if they don't know what they're signing.

As I've said before, I find it irresponsible for any MLO/lender to not fully explain these documents and disclosures to their borrowers.  However, I also find it irresponsible for any borrower to not understand what they are signing too.  Getting a mortgage loan is a very serious financial decision and for anyone to take it so carelessly as to not know what their closing costs are going to be is just plain foolish.

Buying a home is one of the most important decisions someone can make.  The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need to be working with true professionals who can and will serve their buyers best interests.  If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen at 805.2069123 or donne4loans@earthlink.net.  That's what I'm here for and I would love to be able to assist you in your search for an affordable home loan.

HOW ARE A BUYER'S CLOSING COSTS DISCLOSED? Let Me Count the Ways! - Part 1

I recently came across a post here where the blogger asked, "how could a buyer get all the way to the closing table without knowing what their closing costs are"?  In typical AR fashion, dozens of AR Realtors herded together to throw lenders and their Mortgage Loan Originators (MLO) under the bus by blaming them for not disclosing to the buyer their closing costs.  This was just another classic example of how truly ignorant so many Realtors still are about the loan process.  This however is a whole other post and not the topic of this particular post. 

As for the buyer who made it all the way to the closing table without knowing what their closing costs were?  My first thought was that the buyer in that scenario was probably either being less than honest or had a serious case of selective memory and simply blocked out all the numerous disclosures they signed outlining and breaking down all of their closing costs. 

After further thought though, I realized (as I so often have in my 8.5yr mortgage career) not all MLO are like me who disclose and explain to my borrowers (as often as needed) their closing costs and funds to close (FTC).  Furthermore, not all borrowers are like most of mine who have no problem asking me to explain something to them again when they don't understand it. 

On that note, I find it atrocious and irresponsible that some MLO and/or lender allowed their borrower to get all the way to the closing table without understanding what their closing costs were.  I also find it truly sad as well as irresponsible that some borrower allowed themselves to get all the way to the closing table without knowing exactly what they were paying for.  

While this particular scenario is truly sad and maybe even tragic, nowadays, it is probably more the exception than the rule and not some opportunity to go around bashing all MLO and/or lenders. 

Not only are we MLO and lenders bound by law to disclose a borrowers closing costs (several times too) but it is our responsibility to make sure the borrower understands what they are signing.  But, it is also a borrower's responsibility to understand what they are signing and if they don't then they need to say so and ask questions - ask a lot of questions if necessary until they fully understand what they are signing! 

First and foremost, let me say that no one works for free and that includes mortgage lenders.  Every single mortgage loan will have costs and fees associated with it and while some lenders will have you think that there are no costs or fees to their loans, rest assured, there are - all they've done is roll them into the loan.  Whether you pay up front at the close of escrow or whether you pay every month for the life of the loan, you, the borrower, will pay for the closing costs associated with your mortgage loan. 

Having said that, what I hope to serve in this post is to help educate borrowers and prospective buyers (and who knows maybe even a few Realtors/agents) about the various documents that outline and breakdown the borrowers closing costs - all before they get to the closing table! 

Uniform Residential Loan Application (1003):  Long before a borrower ever gets into escrow or even looks at a single property (hopefully), they will speak to a lender and/or the lenders MLO about getting pre-approved for a mortgage loan.  On pg 3 of the 1003, is a section that outlines all the details of the transaction, including the closing costs and the FTC.  Underneath that section is where the borrowers acknowledge and agree to the info on the 1003. 

Now a good MLO (because it seems imperative to distinguish between the MLO who explains these details and those that don't) will disclose and explain every single line of the details section to their borrowers and hopefully, the borrowers will understand the details to the transaction that they are agreeing to.  If not, this is when borrowers are responsible for asking their MLO/lender questions about anything that they do not understand. 

Furthermore, it is the MLO/lenders responsibility to explain the details again and continue explaining it until the borrower is certain they understand what the details of their transaction are going to be, including the closing costs and FTC. 

Itemized Fees Worksheet (IFW):  Th IFW is something that any good MLO will provide to the buyer in conjunction with their 1003.  The IFW breaks down the costs and fees associated with a borrower's loan transaction line by line.

Once again, it is not only an MLO and/or lenders responsibility to provide a breakdown of a borrowers closing costs but it is also the borrower's responsibility to make sure they fully understand what they are expected to pay for and how much they are coming to the table with.  If your MLO and/or lender does not provide you with an IFW - ask for it! 

HUD Settlement Cost Booklet:  In accordance to the Real Estate Settlement Procedures Act (RESPA), lenders and MLO are required to give borrowers this booklet when applying for a mortgage loan. 

This 48pg booklet helps borrowers familiarize themselves with the various stages of the loan and home-buying process, including closing costs.  It is a serious violation for any lender and/or MLO to not provide you one of these booklets.  If you don't get one - ask for it!

Now, having said this, it is not the MLO and/or the lenders responsibility to read this booklet to their borrowers.  As responsible adults, it is the borrowers obligation to read this booklet and if they don't understand something, then ask your MLO and/or lender to clarify.

These are just some of the most basic forms of documentation that an MLO and/or lender provides to the borrower regarding closing costs associated with a loan transaction.  While I can't speak for all MLO, I actually have at least one (often many more) discussion with my borrowers long before they ever apply for a loan and/or I collect one single piece of documentation from them.

Just yesterday, I received a call from a prospect who had read one of my AR posts regarding a particular loan product.  After discussing some of the advantages and benefits of this particular loan product, the next thing I discussed were the fees and costs associated with this particular loan product.  But that's just me and that's the way I work.

I hope you stay tuned for Part 2 where I will discuss the Good Faith Estimate (GFE), the Mortgage Loan Disclosure Statement (MDLS) and the Settlement Statement (HUD1) and check out the rest of the ways that a buyers closing costs are disclosed long before they ever get to the closing table.

HOW ARE A BUYER'S CLOSING COSTS DISCLOSED? Let Me Count the Ways! - Part 2

Choosing Your In-Laws, Brother's, Half sister's, cousin for your realtor is REALLY not a good idea if they are not ready, willing and able to serve your special real estate needs.  SERIOUSLY!!! 

I've recently come across a few posts that got me to thinking about the way that some buyers and sellers choose their Realtors/agents. 

First, there was You Don't Want To Bother Your Agent, So You're Bothering Me? by Lorrie Semler and then there was Your lender is your In-Laws brothers half sisters cousin? Oh joy. by Cynthia Larson and lastly, there was I don't work in that price range by Tish Lloyd.  All really good posts and worth reading! 

My comments on these posts were based on my professional experiences with my borrowers here in my market in Los Angeles & Ventura counties.  As a licensed Mortgage Loan Originator (MLO), I work predominantly with buyers so I'm not going to address working with sellers.  Furthermore, many of the buyers I work with are low-medium income borrowers who are either first time buyers or are using some sort of down payment assistance (dpa) program to purchase a home.  These buyers are typically in the low-end of the market here, which is approx. $400,000 or less.

These types of buyers have many challenges in finding suitable and eligible properties to purchase.  Because our market here in Los Angeles & Ventura counties is absolutely saturated with run-down, dilapidated, dumpy REO's, many of these properties are simply not suitable because their condition disqualifies them for financing. 

Furthermore, some dpa programs here have also disqualified certain types of short sales and tenant occupied properties are also disqualified.  Lastly, some programs are very area specific and are only eligible for certain cities, counties or census tracts. 

Needless to say, a Realtor/agent for this type of buyer will be spending more time and energy serving the real estate needs of their buyer.  As a result of the additional time and energy required for these types of buyers, many Realtors/agents have made the decision not to work with these types of buyers.  

Without getting into my professional position on this practice or my personal opinions about these types of Realtors/agents, suffice it to say that finding a Realtor/agent around here for these types of buyers is really challenging.  Consequently, many of these buyers are then left to either working with listing agents of the properties they wish to see/buy and/or working with friends or relatives who are out of area Realtors/agents. 

These types of scenarios pose so many issues and predicaments with the most obvious ones being: 

A) Out of area Realtors/agents (who are not members of the local boards) are advising their friend or relative buyers to lie to listing agents in order to see properties so that the out of area Realtors/agents who are a friend or relative can swoop in later and write the offer. 

B) Working with the listing agent to represent you as your Buyers Agent (BA). 

C) Realtors/agents with little to no business are taking on these buyers and then dumping them or ignoring them later once they have a few higher end clients to work with. 

First and foremost, scenario A is just downright dishonest and unethical.  Realtors and agents are bound by rules, regulations and codes not to behave and/or engage in dishonest and unethical.  PERIOD!!! 

Advising clients to lie to other Realtors/agents just because a particular Realtor/agent can't or won't spend the time, energy or resources to serve their clients real estate needs is simply no excuse to engage in this type of behavior.  Furthermore, recruiting clients to engage in the same dishonest and unethical behavior is just despicable. 

For buyers out there working with an out of area Realtor/agent who is a friend or relative, if your friend or relative tries to recruit you into engaging in this type of behavior - RUN!!!  Engaging in this type of behavior sets you up for potential liability later on and you should be asking yourself why your friend or relative would put you at risk like this. 

What your friend or relative should be doing is referring you to a local Realtor/agent who can properly, ethically and legally serve your real estate needs.  Buying a home is one of the most important decisions you can make and choosing the right Realtor/agent is one of those decisions that a buyer really needs to make very wisely.

As for scenarios B & C, these are topics that could be a post all unto themselves because there are just so many reasons why these are just a really bad decision for a buyer to make so I will address this in a later post (stay tuned for Part 2).   

Today's real estate market can be really scary, which is why it's important to get as much information as possible before you start your search.  The home buying process is not a simple process and it's because it can get really complicated and convoluted, that buyers today need to find the right person who is best suited to assist them.  For more info on affordable home loan options in Los Angeles or Ventura counties, contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net.

Photos courtesy of flickr:   nadinereilly   cheesecurls   idreamininfrared   giacomomacis

I recently came across Are REOs real comparables? by Orlando Masis and before that it was Appraisals: Behind the Scenes in the Appraisal Wars by Kathy Godin.  Both of these posts were about REO properties being used to value equity sales. 

While Orlando, who is an appraiser, was resolved to using REO's as equitable comps for equity sales, Klem, the appraiser in Kathy's post, was outraged at the way that lenders and appraisal review boards were replacing his equity sale comps for an equity sale subject property with REO comps.

Here in Los Angele & Ventura counties, we are still in a declining market that is absolutely saturated in REO's and short sales however, in many areas, we are still seeing a percentage of equity sales.  When the subject property is an equity sale and there are equity sale comps available, then these appropriate comps need to be used first (with applicable adjustments) before resorting to REO's.  Unfortunately though, this not happening.

Most lenders are requiring at least six comps: 3-solds, 2-pendings and 1-active (or some similar guideline) and so often, I am seeing the AMC's appraisers are choosing the six lowest comps regardless of what the other comps are. 

Quite a few times, I have seen appraisals where the equity sale subject property has appropriate equity sale comps to choose from that were within the 90 day timeframe and less than .50mi from the subject property. 

For these appraisals for equity sales, the AMC's appraisers completely ignored all of the equity sale comps and instead used all REO comps to value the equity sale. 

It's no coincidence that many of the equity sales that were not used were often the highest comps and many of the REO comps used were the lowest comps. It's as if the AMC's are ordering their appraisers to use the six lowest comps (with applicable adjustments) regardless of the subject property features and/or the features of the other comps.

It's been my experience that the only way to get the AMC's and their appraisers to even consider the most appropriate comps, we have to start appealing the appraisals and start justifying why the other comps must be used.  If the subject property is a meticulously maintained equity sale that has been totally rehabbed or upgraded with high-end features, I assure you, until we start fighting back against unjustified low appraisals, the AMC's and their appraisers are going to continue to ignore the most appropriate comps.  If you're already in a declining market, then recovery becomes a never ending uphill battle.

BUYERS:  If you've found a wonderful property, in great condition, that is just perfect for you and/or your family and you want to call it home - don't just walk away from a low appraisal - fight it.  If you feel that you and your Realtor/agent put together a really fair market offer, then fight that unjustly low appraisal or it's back to searching for another perfect property.  God knows how many other offers you'll have to negotiate before you get into escrow again.  Ask yourself:  "isn't the home worth fighting for?  Do you really want to start looking again"?

REALTOR/AGENTS (listing & selling):  Unless you and your client want to put that home back on the market or you and your client want to start looking again for that perfect property, then I strongly suggest, do what you have to do to fight that unjustly low appraisal.  Realtors/agents:  justify that sales price you fought hard to negotiate for your clients!

Until buyers and sellers and their Realtors/agents start fighting these unjustly low appraisals, the AMC's and their appraisers are going to continue to churn them out.  Yes, it takes a little bit of time, energy and resources to appeal appraisals but until we take the time and energy to fight back, we are going to continue to see either declining sales and/or declining median sales prices.  While this scenario may not be indicative of so many other markets across the country, this is our reality here in Los Angeles & Ventura counties and we need to start being more proactive about changing this around.

Yes, we're working harder these days than ever before and appealing appraisals is hard work but I assure you, when we start doing this, many of our buyers and sellers will probably appreciate us stepping up and going to bat for them.  It's been my experience that we may not always be able to hit it out of the park (get the value we were shooting for) but we'll definitely be scoring points (keeping the escrow active) and may ultimately win the game (getting to the closing table).

The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need real professionals working on their behalf.  If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net.  That's what I'm here for and I would love to be able to assist you in any way I can.

Photos courtesy of flickr:  koyume   appraisersbr   bali-jm   giacomomacis  

I recently came across What do you mean, you need a letter from my Lender? by Tish Lloyd and it reminded me of some of the referrals I'm getting lately as well as some of the prospects that are contacting me.  Tish blogs about the "old days" and what Realtors used to do back then.  It reminded me of my own "old days" (circa 2002) where prospective buyers could "lock & shop".  Buyers would get pre-approved, lock in their rate and then go shop for a home.

Needless to say, those days are over and for a lot of Realtors (like Tish) so are the "old days" of taking out buyers who haven't been approved for a loan yet.  So many of the referrals and prospects that contact me start out the same,

"I make XXX,XXX a year, I have a phenomenal fico score, I've got XXX,XXX to put down.  I want to buy 123 Whatever St. in Anytown but my Realtor told me I need to get a pre-approval before I can make an offer". 

Like so many prospective buyers (as well as so many of their Realtors/agents), they think all they need is a good income, money in the bank and a great fico.  I assure you, I wish it were that simple but unfortunately, it is not. 

There is no such thing as a "golden buyer" these days unless, of course, they have a ton of money that can be verified and documented.

First and foremost, I want to strangle the BA's (until they're blue in the face) showing these referrals and prospects properties without a pre-approval but if those BA's want to waste their time, energy and resources showing unqualified buyers properties they can't buy, I guess that's their prerogative. 

I say it all the time and I'll say it again, "the loan process is so complicated and convoluted these days that prospective buyers really need to talk to a lender as soon as they start thinking about buying a house, not after they spent weeks looking at properties and finally found one they want to make an offer on".

The biggest issue I see with many of my referrals and prospects these days are they're self-employed people and while it is true that they make a lot of money, the fact that they write off a ton of it generally makes them unable to qualify for a loan. 

It's kind of astonishing that I have to explain to these really intelligent and successful people that when they write that income off, it is no longer available to be used as qualifying income.  It's just amazing how shocked they become that they can't write off most of their income and then turn around and use that same income to qualify for a loan.

Secondly, while it's nice that so many of these folks have managed to save up huge amounts of cash reserves, however, in order to be able to use these cash reserves as their down payment, the funds have to be in their own account and preferably seasoned for at least 90 days.  Furthermore, depending on the loan program, depleting business accts (even if you are the sole owner or primary shareholder) can be a deal breaker in most cases unless, of course, the business is buying it as an investment and that is a whole other scenario.

Lastly, while it's great that not only have these folks been able to establish and manage a successful business but they've also been able to maintain phenomenal fico scores in process.  BRAVO!!!  WHO HOO!!!  HALLELUJAH!!! 

This is wonderful however, it doesn't matter if you have an incredible fico score because if your debt-to-income (dti) ratios are too high, the highest fico in the world isn't going to allow you to qualify for a loan. 

Lenders and investors are much more stringent these days on dti ratios than they ever have been.  While your great score can be a really strong and compelling compensating factor, you're going to need a lot more than a great score to compensate for those horrible dti ratios.

Anyway, the point is (I really do have one) that regardless of what you or your Realtor thinks you may qualify for, until you speak to a lender, all the money you make, how much you have to put down and those fantastic ficos don't mean squat - SERIOUSLY!!!  It takes more than that to get a loan these days.  Lastly, and I can't emphasize this enough, Realtors:  stop wasting your time, energy and resources showing properties to people who aren't qualified to buy.  SERIOUSLY!!! 

Save your time, energy and resources for those that are serious buyers and by that, I mean those who have done what's necessary to qualify for a loan and have been pre-approved.  I don't care what their grandiose excuses are or how confident they are, if getting a loan won't be a problem for them then talking to a lender and getting pre-approved will be a piece of cake - RIGHT???

Buying a home is one of the most important decisions someone can make.  Today's real estate market can be really scary, which is why it's important to get as much info as possible before starting your search.  The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs.

For more info on how you can get pre-approved for a mortgage loan, please contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net.  That's what I'm here for and I would love to be able to assist you in your search for an affordable home loan.  

Pictures courtesy of flickr:   leomitch   lochman67   bwehr6   giacomomacis

WELL IT'S ABOUT &*%# TIME!!! 

Today, the city of Los Angeles filed a lawsuit asking a judge to fine Deutsche Bank hundreds of millions of dollars and issue an injunction forcing the bank to clean up the more than 2,000 foreclosed properties it owns in Los Angeles.

The City Attorneys office states that Deutsche Bank is the largest slumlord in Los Angeles and that an extensive investigation has revealed that the bank and it's representatives (ie. servicers & listing agents) have not only let these properties turn into graffiti-scarred dens for squatters, gang members and other criminals but have basically destroyed the quality of life in hundreds of neighborhoods and driven up crime rates in the process. 

Furthermore, city officials have discovered that Deutsche Bank and their reps have illegally evicted tenants and have terminated their utilities.  If successful, the suit would be the first of its kind in the U.S. in which a city was able to collect penalties and restitution from banks for the havoc that their foreclosured properties have wrought on the city.

I am so glad to hear that something is finally being down about this matter.  This is such a huge problem here in Los Angeles county as well as in Ventura county too.  Frankly, I would like to see more city and county municipalities take similar action against all bank sellers and their representatives for their failure to maintain their REO properties to minimum building code standards.

I know that in a couple of my transactions, the county of Ventura got involved because they had put liens on the properties that my borrowers were buying for numerous bldg code violations.  When a municipality does this, it creates a cloud on title and the property can't be transferred to a new owner until the liens are paid in full.

Good grief, some REO properties are flat-out health and safety hazards to even walk into.  When walking into some properties, you are literally taking your life into your hands and I'm not referring to the crime rates of the neighborhood either.  There are so many properties that have seriously dangerous health and safety issues that they are literally not safe walking into.

Don't even get me started on how some banks are flat out violating CA tenants rights.  Yeah, I know, everyone hates having to deal with tenant occupied properties but the fact remains that here in CA, tenants have rights and a landlord must adhere to the laws in dealing with them.  I have seen first hand from some of my own borrowers who decided to buy after being evicted by bank sellers.  These were tenants who made their rent payments every month, on time (and had cancelled checks to prove it) but were thrown out with no regard to their lease contracts or deposits.

Anyway, I am so glad to see that Los Angeles is finally doing something about it.  Hopefully, other cities will follow suit. 

I recently came across, Waging War . . . Real Estate Deals Where No One Wins! by Carla Muss-Jacobs.  Carla describes some of her more recent transactions as "war-like" and her buyers as having the propensity of "ripping the sellers' flesh off".  It kind of reminded me of my own market but not exactly in the way that Carla sees her market.

I started in the mortgage industry in 2002, a time when sellers were getting double rates of appreciation every year for their homes.  A time, not so different from today, when multiple offers were the norm not just on the really nice homes but even on the not so nice homes.  A time when over-paying for a home wasn't an issue because a home was simply worth whatever someone was willing to pay for it

A time when my borrowers, low-medium income people who were often using down payment assistance (dpa) to purchase their first home, were considered less desirable buyers because they couldn't afford to pay astronomical prices for some dumpy, dinky condo like so many other buyers were doing.

Back then, my borrowers weren't in a position to get one of those liar no-doc, stated loans.  You see, dpa programs as well as FHA (the bulk of my business for much of my early career days) loans are all full doc loans where my borrowers eligibility to purchase was actually based on justifying and supporting what they could actually afford to buy.  Furthermore, these types of loan programs were all limited to a designated price range; price ranges that fast became insufficient for the market at that time. 

So, time after time after time after time, my borrowers kept getting outbid by other buyers.  For my borrowers, the bidding "wars" were fierce and my borrowers were continuously battered and beaten during these battles and often left for dead (ie. not even considered). 

For those that somehow managed to win the battle of the negotiation, they often suffered later from the sellers "snipers" who would just suddenly "terminate" them (and their transaction) simply because of some chest of gold (a higher offer) to be had somewhere else.

Fast forward to today and my low-medium income borrowers are still battling it out here in Los Angeles & Ventura counties and are still being slaughtered in the field too.  The difference now is that their opponents are very different creatures.  Instead of going to battle against other buyers higher offers, now my borrowers are duking it out with all-cash investors and their lowball offers. 

Today, the sellers "snipers" are even more brutal, cold-blooded and calculating than ever before and actually make the sellers "snipers" of earlier days seem almost humane.  Some of my borrowers who couldn't buy years ago because they couldn't afford the higher home prices back then, have actually said to me that trying to buy a home now is even worse than it was years ago.

Years ago, my clients were losing out to other people like themselves who were just trying to buy their first home too and who were just outbidding my clients with higher offers.  Nowadays, my clients are losing out to investors scooping up properties in bulk and "stealing" available properties with their lowball cash offers. 

My borrowers get so discouraged because years ago they couldn't afford to play the bidding "war" games and now that they can afford to be the highest offer, it no longer matters if they have the highest offer because sellers "snipers" now want the quickest and easiest "kill".

So while I do feel sorry (really, I do) for sellers who are getting kicked while they're down by lowball offers on the homes that they're short selling for less than what they bought them for, I most certainly do not feel sorry for the banks sellers who are shooting their nose off to spite their face by accepting lowball cash offers on many of their REO properties. 

While I understand that some of these properties have to be sold for cash because based on their condition, they wouldn't qualify for financing anyway, however, there are so many other properties that do qualify for financing that are not being sold for fair market value.  When the bank sellers sell these properties to cash investors making lowball offers simply to get a quick sale, they are not only driving down the prices for that neighborhood but they may also be preventing some buyers from making that property a home. 

Don't even get me started on what some of these cash investors are doing with these properties.  While some may be totally rehabbing them and then turning around and selling them, there are quite a few others who are doing as little as possible and then turning around and renting them out at market value (which is rising every month around here).  Quite frankly, some of todays cash investors are nothing more than tomorrows slumlords.

So when I read about how buyers are out for blood these days, I must admit, it all sounds somewhat foreign to me.  While I do know that those types of buyers do exist, my own Realtor friends here in Los Angeles & Ventura counties tell me stories of these types of buyers.  To some degree, stories like this make me appreciate and respect my own buyers so much more. 

You see folks, there are some buyers out there that are NOT out for blood and wouldn't dream of "ripping the sellers' flesh off"; it's simply not in their nature.  Believe it or not, there are actually buyers out there that just want to FINALLY buy their first home (after dreaming about it for years) and are actually ready, willing and able to pay a fair market price for it (that does not mean they are desperate enough to pay more than what it's been valued at). 

Yes, these buyers do come with a little more baggage (dpa, low dp, minimum property requirements, etc...) but they're good people who just want to be considered and not instantly kicked to the curb like last weeks garbage.

Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search.  The home buying process is not a simple process and it's because it can get really complicated and convoluted, that buyers need to work with professionals who can help them through the home buying process.  

For more info on affordable loan options that are best suited for your own needs contact me, Donne Knudsen at 805.2069123 or donne4loans@earthlink.net.

Photos courtesy of flickr:  3WN!   williammeng  tuan   cstein96  giacomomacia

I recently had an interview for an article on "why a mortgage puts a home buyer at a disadvantage and how can buyers beat out the cash bidder" by Amy Hoak from Market Watch. 

While I understand that reporters typically can't publish the entire interview, I just wanted to comment on some of the ways I recommended to Ms. Hoak how the finance buyer can make their offer appear stronger that she wasn't able to publish.  First and foremost, I recommended that prospective buyers get "pre-approved" for a mortgage and not "pre-qualified".  I went on to explain the differences between these two processes. 

Calling up some 800 for some big, national, retail bank (or worst, some internet lender) and spending a few minutes on the phone giving some unlicensed bank clerk your name, address, phone number, social security number and whatever amount you told them you make so they could run a credit report is not a "pre-approval". 

Getting a letter from said big, national, retail bank saying that based on the info you provided, you are "pre-approved for XXX,XXX.XXX" amount is absolutely worthless.  Typically, this type of letter says nothing about your qualifications other than what your credit score is and a true pre-approval is about so much more than just your credit score. 

Furthermore, most of these worthless letters from the big, national, retail banks provide no contact info on them in order for the listing agent (or even you or your buyer agent) to be able to actually talk to someone about the status of your application.  This does nothing to strengthen your offer, quite the contrary; it actually weakens your offer with a seller and their listing agent. 

A "full" pre-approval would entail a licensed and experienced MLO to review all of your qualifying documentation (paystubs, tax returns, bank statements, id's, etc...) in order to make a complete and accurate assessment of your ability to get a loan.  A pre-approval is not a guarantee to get a loan but rather a "conditional" pre-approval, providing you fulfill certain conditions. 

Another thing that I often advise my borrowers after I've pre-approved them is to be serious and don't play games, especially on run-down, dilapidated, dumpy REO's that are typically not eligible for financing anyway. 

I don't know what other markets are like but here in Los Angeles & Ventura counties, these properties are typically not suitable properties for financed buyer and as such are getting scooped up by cash buyers. 

The bank sellers for these money pits are much more interested in accepting a lower cash offer with no contingencies than a higher financed offer that they know doesn't have a chance in the world of closing because the property is such a dump. 

So, if your strategy is to lowball a bunch of dumps in an effort to get a "good deal", you may as well just continue renting (or living with your parents if that's the case) because you don't have a chance in the world around here against a cash offer. 

Furthermore, lowballing nice and decent properties that have been upgraded or are move-in ready does not improve your chances of getting the property either.  Once again, it just weakens your offer because chances are there are already lowball cash offers on it as well as higher financed offers.  Your ridiculous lowball financed offer will simply be ignored and probably won't even get a counter-offer. 

My comment to Ms Hoak about buyers working with sellers for equity sales was in reference to investors who purchase distressed properties in bulk and then turn around and totally rehab them and then flip them.  These sellers are not the least bit interested in lowball cash offers.  Furthermore, because they have completely rehabbed the property, they're not worried about inspection issues and if they've priced it right, they may not have to worry about appraisal issues. 

Lastly, as I mentioned in the article, many financed buyers, especially here in Los Angeles & Ventura counties, need to be patient.  Chances are they are probably going to lose a few offers and properties before they actually get one accepted, even if they are making serious offers on nice properties.  Around here, there is a lot of competition for the nice properties and the ones that are priced right go fast!  Quite often in a matter of days! 

So, if you see something you like, don't dilly dally around showing it to everyone you know or hem hawing about what to offer.  Get your fair market offer in fast and make it your best and highest from the get-go.  That way you not only increase your chances of actually getting your offer accepted but if you do lose it, you know that you did the best you could. 

If you lowball it and lose it, you will only be mad that you didn't offer higher and that you didn't get a second chance to go higher.  You know the saying, "you never get a second chance to make a first impression". 

Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search.  The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs. 

If you have any questions and/or concerns or if I can be of any further assistance, please feel free to contact me, Donne Knudsen at 805.2069123 or donne4loans@earthlink.net.

Photos courtesty of flickr: marketwatch jpearsons carolyncoles  favoritegamesguide  klimet  giacomomacia 

What is a HomePath property and what do I need to do to buy one?

With nearly 800 HomePath properties available here in Los Angeles & Ventura counties and more than 50 more coming up soon, I get numerous calls/emails asking me about these properties. 

And now, Fannie Mae has special incentives for owner occupied buyers to provide 3.5% towards their non-recurring closing costs.  Just this week, I've already received a couple of calls and I strongly suspect that will continue until their special offer expires on September 30, 2011.    

For starters, HomePath properties are Fannie Mae foreclosures; these are properties that were foreclosed by a lender where Fannie Mae was the investor.  Because Fannie Mae holds these loans, they can revise their own conventional guidelines.  As a result, there are some great benefits to purchasing one of these properties. 

PROS:  One of the best benefits is that HomePath only requires 3% down payment, which basically allows Fannie Mae to compete with FHA loan products.  The HomePath down payment can also be from either the borrower's own funds, a gift from a relative or from a non-profit agency, which means borrowers can use it with down payment assistance (dpa). 

The HomePath loan program also doesn't require monthly mortgage insurance (MI) or an appraisal and their condo guidelines aren't as stringent as most other loan programs (there are still some basic condo requirements).  The benefits of no appraisal or MI can eliminate some of the biggest challenges that can come up in an escrow transaction. 

While these are all wonderful advantages of using the HomePath loan program to purchase a HomePath property, these benefits don't come without some of their own challenges. 

CONS:  While the programs benefits definitely appear to be really great advantages over other loan programs, these benefits are most certainly not free.  The rates/pricing on the HomePath program is typically at least about a half a point or more higher depending on pricing adjustments than most FHA loan products. 

Furthermore, it's been my experience with this program that the reason Fannie Mae waives the appraisal requirement is that many of the HomePath properties (at least quite a few here in Los Angeles & Ventura counties) would never qualify for financing if an appraisal was required. 

It's because of the disadvantages of this program for these properties that I strongly suggest any buyer considering the purchase of a HomePath property with a HomePath loan to get a home inspection done. 

A competent and experienced home inspector will be able to discover the true property condition.  Like any other REO, don't expect Fannie Mae or their listing agents to disclose any thorough or extensive property disclosures regarding property conditions. 

Another thing that I've noticed about many HomePath properties is that they tend to be overpriced; this having more to do with the fact that there will be no appraisal required to support the price than anything else. 

Once again, I strongly suggest that before making an offer on a HomePath property, buyers still need to have their Realtors/agent run the recent comps for the area to determine what the fair market value is for the home. 

While Fannie Mae does allow buyers to use other loan programs to purchase their HomePath properties, because of some of the deficiencies of the HomePath properties, it becomes extremely difficult and in some cases impossible to use any other financing than the HomePath loan program. 

As I said before, under standard Fannie Mae or FHA guidelines, many HomePath properties would never qualify for financing.  It's because of this that Fannie Mae devised the whole HomePath program. 

If you can tell, I am not a big fan of the HomePath program for a buyer who can't afford to bring these homes to minimum building code standards and that is primarily because many of the HomePath properties that I have personally seen are no different than all the other run-down, dilapidated, dumpy REO's on the market. 

For most of my borrowers, who are typically low-medium income buyers, many of which are using down payment assistance to purchase their first home, this is not the kind of home that they can afford to buy.

However, for an investor, this is a great program and I highly recommend it for the first time investor who is looking to establish their real estate investment portfolio, especially the all-cash investor.  Fannie Mae loves all-cash investors. 

Buying a home is one of the most important decisions someone can make.  Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search.  The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need affordable loan options that are best suited for their own needs. 

If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net.  That's what I'm here for and I would love to be able to assist you in your search for an affordable home loan. 

What Kind of First Time Buyer Programs are Available in Los Angeles & Ventura Counties? FAQ - #1

What kind of property can I buy? FAQ - #2

What Kind of Paperwork Do You Need to Pre-Approve Me? FAQ - #3

Why Do I Have to Get Pre-Approved with Other Lenders I Don't Want to Use Before I Can Make an Offer on a Property? FAQ - #4

What Kinds of Things Can Go Wrong in the Loan Process? FAQ - #5

What are Impound Accounts & Why Do I Need to Have Them in Order to Close My Loan? FAQ - #6

Can You Help Me Get My Kid Get Out of My House? FAQ - #7 

I'm Supposed to be Closing Next Week Can You Help Me? FAQ - #8 

If I Buy a Duplex, Can I Apply the Tenants Rent Towards My Mortgage? FAQ #9

What Happens if My Appraisal Comes in Low? - FAQ #10

Can I Still Get a Loan if I Don’t Have Perfect Credit? – FAQ #12

Are There Still Loan Programs Where I Don't Have to Put Anything Down? - FAQ #13

Photos courtesy of flickr:   HomePath   nadinereilly   carolyncoles   giacomomacis

Since the inception of HVCC in May 2009, I have seen more low appraisals in my escrow transactions than I had seen in the previous seven years of my mortgage career. 

A low appraisal doesn't necessarily have to be a deal breaker though.  There are a few different options that are available to both buyers and sellers that can keep the transaction moving and progressing forward. 

OPTION 1: - When receiving a low appraisal, I will almost always recommend that my borrowers try and re-negotiate the sales price they initially agreed to.  This is the preferred option that most buyers want to go simply because these days, no buyer wants to pay more for a home than what it's worth. 

While many listing agents may whine and complain (including ones here in AR) about buyers using low appraisals to re-negotiate the contract and/or sales price, the fact is that the re-negotiations between the parties don't have to be adversarial and they certainly don't have to be a deal breaker. 

In many of my transactions where my borrowers have received a low appraisal and have chosen to go back to re-negotiate the sales price, quite often, the parties will come to mutually rewarding agreement and the transaction proceeds as planned.  Isn't that what we all want? 

OPTION 2:  This is the one option that is probably most favored by listing agents and that would be for the borrowers to just pay the difference between the sales price and the appraised value.  Of course, this is the one option that is the least favored options that borrowers want to exercise. 

If the difference is significant, some borrowers may be forced to exercise another option simply because they can not afford to pay the difference.  However, I have actually seen some of my borrowers opt for this option after first trying to re-negotiating the sales price. 

For some borrowers, this is more preferred option than cancelling the transaction because the difference may be small and they have the means to come up with the difference.  The buyers feel that because they really love the property and they plan on being in the property for many, many years, they are not concerned with a slightly lower appraised value. 

OPTION 3:  This is the option to appeal the appraiser.  I strongly caution borrowers who wish to go with this option.  This option takes times and sometimes a borrower can incur an additional fee for appealing the appraisal.  If a transaction is crunched for time, before engaging in this option, it would be best to see if an extension can be granted.  Perhaps if the other parties understand why an extension is necessary, they may be more willing to cooperate, this could avoid the need to re-negotiate the sales price.  

However, in order to successfully appeal an appraisal, the buyer and their MLO need to have some really strong and compelling documentation supporting a higher value for the subject property.  By working with the Realtors/agents in the transactions to obtain documentation to support a higher value, the appraisal review board can request that the appraiser take into consideration the supporting documentation in order to revise the property value. 

While I haven't always been able to support my appeal 100%, I have always been able to support a higher value than the value the HVCC appraiser initially granted. 

OPTION 4:  If all else fails, there is one last option.  If negotiations between the borrowers and the other parties have failed and they were unable to reach a mutually agreed upon price or they buyers are unable to pay the difference between the sales price and the appraised value, then another option would be to cancel the contract. 

Once again, while listing agents will whine and complain about buyers using a low appraisal to cancel the contract or as they like to put it "walk away", the fact remains that most buyers have neither the intention nor the means to overpay for home.  Why should they? 

Buying a home is one of the most important decisions someone can make and today's real estate market can be really scary.  The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need to be working with professionals who can help them through the process.

A low appraisal doesn't necessarily have to be a deal breaker and there are options to try in order to keep the transaction active and moving towards the closing table.  In order to overcome the obstacles of a low appraisal, all the parties in the transaction need to be working together towards a mutually beneficial and satisfactory outcome for all parties.  It can be done.  I speak from experience when I say that. 

What Kind of First Time Buyer Programs are Available in Los Angeles & Ventura Counties? FAQ - #1

What kind of property can I buy? FAQ - #2

What Kind of Paperwork Do You Need to Pre-Approve Me? FAQ - #3

Why Do I Have to Get Pre-Approved with Other Lenders I Don't Want to Use Before I Can Make an Offer on a Property? FAQ - #4

What Kinds of Things Can Go Wrong in the Loan Process? FAQ - #5

What are Impound Accounts & Why Do I Need to Have Them in Order to Close My Loan? FAQ - #6

Can You Help Me Get My Kid Get Out of My House? FAQ - #7 

I'm Supposed to be Closing Next Week Can You Help Me? FAQ - #8 

If I Buy a Duplex, Can I Apply the Tenants Rent Towards My Mortgage? FAQ #9

What is a HomePath Property and How Can I Buy One? - FAQ #11

Can I Still Get a Loan if I Don’t Have Perfect Credit? – FAQ #12

Are There Still Loan Programs Where I Don't Have to Put Anything Down? - FAQ #13

Photos are courtesy of flickr:  koyume   animationconcepts   appraisersbatonrouge   giacomomacias

Yesterday, I blogged about Why I May or May Not Be Able to Just "Order the Appraisal Already"!.  I blogged about the other processes that need to happen before a Mortgage Loan Originator (MLO) and their lender can implement the appraisal ordering process. 

However, I intentionally did not go into short sale purchases because there are just too many variables to the whole short sale process that need to be addressed.  In Part 2, I want to explain the different options that buyers have for ordering their appraisal when purchasing a short sale. 

As I mentioned in Part 1, for most properties (REO/equity sale), the appraisal ordering process is relatively simple; not necessarily so for the appraisal ordering process for a short sale.  For borrowers purchasing a short sale, there are other options that are available to them.  However, too often I have seen some of these options come back to either bite my borrowers in additional costs and fees or to lose the property all together.  

There are three options and like most things, there are advantages and disadvantages to them but hopefully I can help you decide which option is best for you. 

Option A:      Consider the transaction no different than any other loan process and begin the loan transaction as soon as the seller accepts the borrowers purchase offer and the borrower's MLO/lender receives a legible copy of the fully executed purchase offer.  Order the inspection(s) (if the borrower plans to have more than one type of inspection) and appraisal and fulfill as many of the prior to doc (PTD) conditions as possible. 

FYI:  the short sale approval letter(s) (if there is more than one mortgage lien on the property) as well as any additional bank addendums will be listed as PTD conditions. 

The advantage of this particular option is that when the short sale is approved, much of the loan has already been processed and the loan is ready for final approval.  Quite often, the MLO/lender may be able to fund and close the loan in a matter of days.  Short sale negotiators are infamous for countering 30-45 day escrow timeframes (that the seller accepted and agreed to) to 10-15 days. 

The disadvantage of this option is that if the short sale is not approved for several months (very common with most short sale purchases), then the chances of the appraisal expiring are highly likely and the borrower will need to pay an additional fee to have it updated.  Furthermore, if the short sale is denied, then the borrower will have lost both the inspection fee(s) (if they had more than one type of inspection) and the appraisal fee because these fees are not refundable. 

Option B:       Is the complete opposite of Option A.  Do not begin the loan process at all until the short sale is approved.  Do not order any inspections and/or the appraisal until the short sale letter(s) are received.  In other words, do not do anything until the short sale has been approved. 

The advantage of this option is that the borrower doesn't incur any costs or fees until they are certain that the bank has agreed to the terms of the sale that the seller has already accepted and agreed to.  The disadvantage of this option is that when the short sale negotiator reduces the escrow timeframe that the seller accepted and agreed to, they will also institute a per diem fee for every day that the escrow date goes past the new closing date that was scheduled. 

Furthermore, if the borrower rejects the banks counter-offer because of the lack of sufficient time to close the loan then the borrower runs the risk of losing the property.  Quite often, these new closing dates can NOT be changed because they are often just days before a scheduled trustee sale date. 

Option C:       This is the option I actually like the best and the one that I most often recommend to my borrowers.  Option C is sort of the happy medium between Option A and Option B.  With Option C, I recommend that borrowers have their inspections done while waiting for the short sale to be approved.  I also recommend starting the loan process and still fulfilling as many of the PTD conditions as possible. 

FYI:  a satisfactory appraisal along with the short sale approval letter(s) will be PTD conditions. 

The advantage of this option is that the borrower incurs less fees and costs than Option A but they also have the advantage of still being able to close in a shorter timeframe than Option B.  This option still has all the disadvantages of the other two options:  losing the fees for their inspection if the short sale is denied as well as having the escrow timeframe shortened and being subjected to a per diem charge for being late.  Furthermore, borrowers may still lose the property if they do not close according to the new scheduled closing date. 

There may be other options but these are the three that I have actual professional experience with in serving by borrowers here in Los Angeles & Ventura counties.  Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search. 

Buying a short sale property is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need to really consider whether or not a short sale property is the right property for them. 

If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net.  That's what I'm here for and I would love to be able to assist you with your mortgage needs here in Los Angeles & Ventura counties.

Photos courtesy of flickr:  koyume   quintcobb   giacomomacis

I subscribe to the daily webcasts of Think Big, Work Small (TBWS), which is hosted by these two guys, Brian Stevens & Frank Garay.  TBWS was founded a couple of years ago by a bunch of real estate and mortgage people who wanted to teach others in the business how to work smarter to grow their business. 

This morning's video was especially interesting because of the notice that the National Association of Independent Housing Professionals (NAIHP) has not only filed a lawsuit against the Federal Reserve to stop the new Fed rules but they have also filed a restraining order to halt the schedule implementation of the new rule on April 1, 2011. 

The guys go on to illustrate through a typical loan scenario that the only people who will be benefitting from the new Fed rules are the big, national, retail banks.  The same amount of money will still be made from a transaction but the new Fed rule just prohibits the Mortgage Loan Originator (MLO) or the consumer from receiving any of it and the big banks willl now get to keep more of it.

Anyway, here is the video regarding the segment I was referring to and there's some amusing info on how BofA is now blocking their employees from being able to watch the TBWS on their computers at work.  The foundation of this info came from a BofA employee.  Check it out.

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NAIHP Files Restraining Order & Lawsuit Against Federal Reserve for LO Compensation Rule

I'm supposed to be closing on my escrow next week and my lender has totally &^%$#* up the deal.  Can you help me?

I don't know if it's just me or if there are other Mortgage Loan Originators (MLO) that are getting a lot of calls/emails like this but they do seem to be coming at a more frequent rate these days.  In my continuing series of answering some of the frequently asked questions that I get from prospects and clients, in Part 8, I want to answer a question that can pose some really challenging opportunities. 

I say opportunities because in many cases, I have been able to help the person who called/emailed me and when I have been able to do that, I not only have a new client but by the close of escrow (COE), I may even have a new friend.  I have become the one that saved the deal.

However, even if I don't get the chance to become the one that saved the deal, I may have had the opportunity to shine by being the one who finally explained the problem to them and/or the one who offered a viable resolution.  Many of these people just appreciated that I took the time to hear them out, let them vent and then actually provided them with some helpful info or some valuable lesson before we parted ways. 

Quite often, those same people will contact me again (after their current deal falls through) and choose to work with me for their next transaction.  They remembered that I was the one who actually called/emailed them back when they needed help or had questions. 

They remembered I was the one who actually seemed like I knew what I was talking about because I had previous experience with a similar situation.  Whether I become the one that saved the deal or just a knowledgeable resource, both scenarios are opportunities to create an impression on someone; an opportunity to shine! 

Whenever I get one of these calls/emails, my first objective is to get as much info as possible in an effort to maybe offering some insight on how to resolve whatever problem they are having in getting to the closing table.  On numerous occasions, after hearing their "story" and in my most supportive voice and demeanor (they're almost always frantic and/or pissed off), I try and explain to them that not being privy to their loan file and all the details related to their loan file, I can not know exactly what the issues truly are or why their lender has now denied their loan and/or why their transaction is falling apart at this late stage in the process. 

However, based on the info that they have provided me, many times, there are so many things that are blaringly obvious to me that I just want to bang my head on my desk.  Quite often, their "problem" is simply nothing more than they chose the wrong lender/MLO or they are simply in the wrong loan product.  Typically, the resolution here is obvious:  change lenders/MLO/loan product. 

If they can get an extension to their close of escrow (COE), then I may be able to help them (depending on how much extension they can get).  If I can't help them (meaning I am not the right MLO/lender), I may know someone who can.  If they can't get an extension to their COE date and their COE date is too close, regardless of whether or not I am the right kind of MLO/lender that can resolve their problem, I can't help them and will not take an app on them.  However, whenever possible, I will try and offer some suggestions for what they should or shouldn't do when this transaction gets cancelled and they continue their home search again. 

I can do a lot of things to get a loan closed but these days miracles are hard to come by and they do take a certain amount of time and preparation to bestow.  Being the one that saved the deal is not something I can do by tomorrow or even next week; I do need to have a certain amount of time to perform my magic. 

Lastly, there are some transactions that were simply doomed from the start.  There are some people who couldn't get a loan if they were the last people on earth.  Why any licensed MLO with half a brain would even take an app on these people is just plain stupid. 

Then there are those properties that couldn't get a loan even if they were totally leveled and rebuilt.  Why any Realtor/agent with half a brain would even write an offer on such a property is mind boggling.  

For these scenarios, there isn't any amount of magic fairy dust even I can produce to save these transactions and get them to the closing table.  JMHO based on my professional experiences with my borrowers here in Los Angeles & Ventura counties.

What Kind of First Time Buyer Programs are Available in Los Angeles & Ventura Counties? FAQ - #1

What kind of property can I buy? FAQ - #2

What Kind of Paperwork Do You Need to Pre-Approve Me? FAQ - #3

Why Do I Have to Get Pre-Approved with Other Lenders I Don't Want to Use Before I Can Make an Offer on a Property? FAQ - #4

What Kinds of Things Can Go Wrong in the Loan Process? FAQ - #5

What are Impound Accounts & Why Do I Need to Have Them in Order to Close My Loan? FAQ - #6

Can You Help Me Get My Kid Get Out of My House? FAQ - #7 

If I Buy a Duplex, Can I Apply the Tenants Rent Towards My Mortgage? FAQ #9

What Happens if My Appraisal Comes in Low? - FAQ #10

What is a HomePath Property and How Can I Buy One? - FAQ #11

Can I Still Get a Loan if I Don’t Have Perfect Credit? – FAQ #12

Are There Still Loan Programs Where I Don't Have to Put Anything Down? - FAQ #13

Photos courtesy of flickr:   bradleyalexander   mikerbaker   jpersons

In Part 1, I discussed one of the reasons why so many loans may be falling out and escrow transactions may be getting canceled.  Now, while I can not speak about other areas of the country or other Realtors/agents transactions, I can only discuss my professional experiences as an Mortgage Loan Originator (MLO) with my own borrowers here in Los Angeles & Ventura counties.

I Part 2, I would like to discuss another issue that comes up that so many sellers and their listing agents (LA) as well as buyers fail to do before getting into escrow.  In failing to do their own due diligence, they leave it up to MLO's and lenders to do everyone else's due diligence for them.  While I can't speak for other MLO's and lenders, I can say that me and my lenders will be doing our jobs (and we're very good at it) and we will be do our own due diligence.

I recently came across another post, Code Compliance- Don't be Caught With Your Pants Down by J Philip Faranda.  While this was a good post that addressed the issue of just one of the reasons (bldg code violations) that some loan transactions get derailed, the thing I liked about this post was that JP assigns the responsibility of this particular duty to the ones who are truly responsible for it - sellers and their LA!  If more sellers and their LA's were doing their own jobs better, buyers and their MLO's and lenders would be able to do our jobs better - approving and funding mortgage loans!  

Here in CA, we have a document called the seller transfer disclosure statement (TDS) and all sellers and their LA are required by law (section 1102 of the CA civil code) to complete this document when selling a property here in CA. 

This is where sellers and their LA are required to include any bldg code violations on the property or unpermitted work on the property.  Sellers are notified umpteen times by the city/county of such violations so ignorance by the seller is inexcusable.  Simply stating on the MLS "buyer to verify" is unacceptable.  That is your job Mr/Ms Seller and/or Mr/Ms Listing Agent - do your jobs!  

On that note, if more sellers and their LA did their jobs before ever listing the property on the market, then I can say that we would unequivocally see less loan fall-out and escrow cancellations.  This is just my professional opinion based on my professional experiences with my borrowers here in Los Angeles & Ventura counties.

Furthermore, when sellers and their LA know that the property has unsatisfactory property issues and/or conditions and they have no intention of making any repairs and/or concessions for the property in order for a financed borrower to purchase the property, then they need to list the property accordingly:  "as-is" and "cash offers only".  Simply listing "as-is" is not good enough, it needs to also say "cash offers only" too.  Don't even get me started on bank sellers who play ignorant simply because they never lived in the property. 

For the record REO sellers & LA:  if your listing has been in escrow before with a financed buyer and the loan fell-out or the escrow got canceled because of property conditions and/or issues and you refused to do anything to rectify the conditions and/or issues, chances are that your property is not qualified and/or eligible for financing. 

Do us all favor and save all of us from wasting our time, energy and money and just list your property accordingly, "as-is" and "cash-offers only".  That way, financed buyers won't waste their time (or yours) by even looking at your property.  They will just automatically eliminate it from all the other available, qualified and eligible properties they have to choose from.  

Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search and definitely before submitting offers on anything you are interested in buying. 

The loan process is not a simple process anymore (it actually never has been) and it's because it can get really complicated and convoluted, that borrowers today need experienced professionals working on their behalf.  Furthermore, buyers need to take a more active role in ensuring that they are going to actually make it to the closing table.  

If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net.  That's what I'm here for and I would love to be able to assist you getting an affordable home loan as well as seeing to it that you actually get to the closing table.

Deals Falling Out of Escrow? Think Twice (and do your homework) Before Making Your Offer - Part 1

Photos courtesy of flickr:  l.million   c.a.r.   goldenwestsignarts  

I recently came across the post, Deals Falling Out of Escrow? Cancellations? Here are 5 Surefire Ways to Avoid Them In Your Business! by Danny Batsalkin, a local Los Angeles Realtor.  This was a good post and while I don't disagree with any of it, I felt that the explanation for one of his five reasons was just a little too vague.  Professionally, I felt that his reason didn't really answer the question of why the "deal" (I use that word loosely) fell out of escrow. 

I felt that it just painted the lender as the proverbial "deal breaker" when in fact that is typically not the case.  To sum it up, it just passed the buck from sellers, their listing agents (LA) and buyers in being responsible for doing their own due diligence onto lenders having to do everyone else's due diligence for them. 

As a licensed Mortgage Loan Originator (MLO) here in Los Angeles & Ventura counties, the number one reason for loan/escrow fall-out (at least my loan fall-out these days) are property conditions. 

A loan will often be denied or more often than not, will have so many repair and/or additional documentation requests that no one in the transaction has either the ability and/or the interest to collect and/or provide the required documentation. 

The real "deal breaker" in many transactions is the condition that so many properties on the market are in.  Here in Los Angeles & Ventura counties, so many properties are run-down and dilapidated REO properties where the bank simply refuses to make any repairs and/or concessions in order to sell the property. 

Don't even get me started on the whole "as-is" nonsense.  Suffice it to say, if banks want to sell "as-is" and make absolutely no repairs and/or concessions in order to sell the property, then they need to also list "cash-only" right next to that "as-is" notice.

Then there are the short sales where the homeowner not only can't afford to pay their mortgage but they also can't afford to make any repairs, at all, for the deferred maintenance that they couldn't afford to keep up with!  Don't even get me started on the properties that have city and/or county building code violations for illegal construction and/or public health and safety hazards.  Once again, if the seller is not going to make any repairs or concessions for the condition of the property, then they need to be listing the property, "as-is" and "cash-only". 

With program guidelines and lender overlays being so much more stringent now than they ever have been before (at least in the eight yrs I've been an MLO), underwriters are scrutinizing appraisals and property conditions much more now and there isn't a lender in town that will fund a loan on an overpriced, dumpy, money-pit with illegal building code violations!  NOT GOING TO HAPPEN!!! 

When viewing properties, buyers and their buyers agents (BA) need to be a little more practical and realistic about property conditions and deferred maintenance.  While some deferred maintenance may be able to escape an appraisers critical consideration, there are other conditions that are just automatic deal breakers and they're actually pretty obvious.  It doesn't take a mental giant to know that doors that don't open, missing flooring, broken down structures, geological and/or structural hazards or facilities that don't operate properly are going to be issues with appraisers, lenders and their underwriters. 

Granted, there will be those times that something will come up that there was no way in #%!! you, the buyer or BA could have known about it (I'll get to that in Part 2).  However, there will be a lot less of the minor inconveniences and issues if buyers and their BA were just a little more conscientious during the property viewing process.  On that note, if you do have a property that has a lot of these minor issues, this may be a great candidate for an FHA 203k loan and you and your BA may want to consider making an offer based on this type of financing.

Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search and definitely before submitting offers on anything you are interested in buying. 

The loan process is not a simple process anymore (it actually never has been) and it's because it can get really complicated and convoluted, that borrowers today need experienced professionals working on their behalf.  Furthermore, buyers need to take a more active role in ensuring that they are going to actually make it to the closing table.  

If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net.  That's what I'm here for and I would love to be able to assist you getting an affordable home loan as well as seeing to it that you actually get to the closing table.

Stay tuned for Part 2 where I will discuss other issues that come up during the loan/escrow process that could have been easily avoided had other parties in the transaction had done their due diligence when they should have.

Deals Falling Out of Escrow? Think Twice (and do your homework) Before Making Your Offer - Part 2

Photos courtesy of flickr:  favoritegameguide   goldenwestsignarts   giacomo-macis

"Can you help me get my kid get out of my house and into their own place?"

Yes folks, this is a real question that I have been asked by some of the parents of some of my clients.  In my continuing series of answering some of the most frequently asked questions that I get from clients and prospects, in Part 7, I want to discuss what parents can do to help their kids buy their first home. 

While some are a little riskier and much more of a commitment, others are relatively pain free.  Think of the benefits too Mom & Dad - you'll have your house back or at the very least, a room back to do what you want with not to mention a little more peace and quiet and some more privacy.  Who knows, maybe you can now sell that big family home and get that nice little condo on the 15^th green somewhere.  The possibilities may be endless by just getting that fully employed, adult kid out of your house. 

There are two ways that parents can help get their kids out of their house and into one of their own; 1) provide a gift for the down payment or 2) become a non-occupying co-borrower (n/o/cb) on the loan.  Option number one can be relatively painless (depending on your financial means) and option number two will require much more of a commitment on the parent's part. 

Option #1:     In providing all or part of the down payment for your kid to buy their first home, the most important thing for parents to remember is that all funds used to buy a home (regardless of who is buying it) need to have a paper trail.  No, you can not just give your kid money and not be expected to prove where the money came from and that it was yours to give. 

One of the biggest complaints I hear from parents is, "it's my money to do what I want with so what do you care where it came from?"  Good grief, if it were that simply folks, do you think I would even be blogging about it now?  Let me say this again (just in case I didn't make my point the first time), "every single cent that is used to buy a home must be documented and verified". 

When "gifting" funds to your kid, you will need to provide documentation of where the money came from (a bank or asset statement).  Yes, that means that you have to provide us (MLO/lender) with a copy of your statement and that means all pages of the statement and not just the page that shows the debit. 

Once again, this can be a major stumbling block for many parents who have objections about providing their own personal info.  On that note, I am often compelled to ask them, "do you want to help your kid get out of your house and into their own?"  Sometimes, reminding parents of the objective and goal is all that is needed to get the necessary cooperation. 

Option #2:     Becoming a n/o/cb is much more of a commitment on the parents part.  In becoming a n/o/cb, parents are actually buying the home with their kids.  That means that if your kidsw don't make the payment, you, Mom and Dad, are on hook for it.  For parents who choose to go this route, this will require that you are fully aware of your kids financial status and completely trust your kid to be a mature and responsible homeowner and borrower.  If you can't, you may want to rethink the whole gift option.

Parents who become n/o/cb will have to provide all the same documentation that their kids provide and parents will have to go through the same underwriting scrutiny as well.  Now, you may be thinking right about now, why would some parents even consider this option when they have the whole gift option. 

Unlike the gift option where the kid is the one qualifying for the loan pretty much on their own, with option #2, this is where the kid can't qualify on their own.  It's been my experience that this option is much more popular where the kid would be spending more on renting an apartment than they would buying a house and renting out a room or two to that buddy of theirs who is also paying a small fortune for some dinky apartment. 

Right now in Los Angeles & Ventura counties, there are many areas where it is more affordable to buy a 3-4bd house than it would be to rent a 2-3bd apartment.  In helping your kids buy a house and manage their rental options, this not only helps your kids get a great place for less than what they would spend on rent but it also helps them realize the dream of homeownership as well as learn to become a mature and responsible homeowners. 

Today's real estate market can be really scary, which is why it's important to get as much information as possible before starting your search.  If it's been awhile since you've bought a home yourself, then you and your kids need to work with someone who has the experience of helping out people just like you. 

The pre-approval process is not a simple process and it's because it can get really complicated and convoluted, that borrowers (and their parents) need affordable loan options that are best suited for their own needs.  For more information on affordable home loan options, please feel free to contact me, Donne Knudsen, at 805.2069123 or donne4loans@earthlink.net.

What Kind of First Time Buyer Programs are Available in Los Angeles & Ventura Counties? FAQ - #1

What kind of property can I buy? FAQ - #2

What Kind of Paperwork Do You Need to Pre-Approve Me? FAQ - #3

Why Do I Have to Get Pre-Approved with Other Lenders I Don't Want to Use Before I Can Make an Offer on a Property? FAQ - #4

What Kinds of Things Can Go Wrong in the Loan Process? FAQ - #5

What are Impound Accounts & Why Do I Need to Have Them in Order to Close My Loan? FAQ - #6

I'm Supposed to be Closing Next Week Can You Help Me? FAQ - #8 

If I Buy a Duplex, Can I Apply the Tenants Rent Towards My Mortgage? FAQ #9

What Happens if My Appraisal Comes in Low? - FAQ #10

What is a HomePath Property and How Can I Buy One? - FAQ #11

Can I Still Get a Loan if I Don’t Have Perfect Credit? – FAQ #12

Are There Still Loan Programs Where I Don't Have to Put Anything Down? - FAQ #13

Photos courtesy of flickr:  Im So Vintage   TheTruthAbout   jpersons